VMware Reports Second Quarter 2013 Results

VMware Reports Second Quarter 2013 Results 
Year-Over-Year Revenue Growth of 11% to $1.24 Billion; GAAP Operating
Margin of 21.7%; Non-GAAP Operating Margin of 33.5%, a Record High;
GAAP EPS of $0.57; Non-GAAP EPS of $0.79 
PALO ALTO, CA -- (Marketwired) -- 07/23/13 --  VMware, Inc. (NYSE:
VMW), the global leader in virtualization and cloud infrastructure,
today announced financial results for the second quarter of 2013:  


 
--  Revenues for the second quarter were $1.24 billion, an increase of 11%
    from the second quarter of 2012.  Excluding revenues attributable to
    GoPivotal and all divestitures that occurred in 2013, revenues for the
    second quarter increased 15% from the second quarter of 2012.(1 )
--  Operating income for the second quarter was $270 million, an increase
    of 28% from the second quarter of 2012. Non-GAAP operating income for
    the second quarter was $417 million, an increase of 16% from the
    second quarter of 2012.
    
    
--  Net income for the second quarter was $244 million, or $0.57 per
    diluted share, up 28% per diluted share compared to $192 million, or
    $0.44 per diluted share, for the second quarter of 2012. Non-GAAP net
    income for the quarter was $343 million, or $0.79 per diluted share,
    up 16% per diluted share compared to $296 million, or $0.68 per
    diluted share, for the second quarter of 2012.
    
    
--  Operating cash flows for the second quarter were $534 million, an
    increase of 36% from the second quarter of 2012.  Free cash flows for
    the quarter were $458 million, an increase of 32% from the second
    quarter of 2012.
    
    
--  Cash, cash equivalents and short-term investments were $5.32 billion
    and unearned revenue was $3.60 billion as of June 30, 2013.

  
Annual 2013 revenues are expected to be in the range of $5.12 billion
to $5.26 billion, and annual license revenues are expected to be in
the range of $2.21 billion to $2.29 billion.  Excluding revenues
attributable to GoPivotal and all divestitures that occurred in 2013,
this represents growth rates of 15% to 18% for total revenues and 8%
to 12% for license revenues.1 
Third quarter 2013 revenues are expected to be in the range of $1.27
billion to $1.30 billion, and third quarter license revenues are
ex
pected to be between $535 million and $555 million. Excluding
revenues attributable to GoPivotal and all divestitures that occurred
in 2013, this represents growth rates of 17% to 20% for total
revenues and 12% to 16% for license revenues.(1) 
"The second quarter was a strong finish to a solid first half of 2013
for VMware," said Pat Gelsinger, chief executive officer, VMware. "We
see a significant market opportunity in the second half of 2013 and
beyond. VMware continues to succeed because we are uniquely
positioned to help customers move from the client-server era to the
mobile-cloud era of computing. As we help them bridge to this new
world, we're empowering businesses to capture new levels of
efficiency, control and agility."  
"We are pleased with our second quarter results," said Jonathan
Chadwick, chief financial officer, VMware. "We exceeded the high end
of our revenue guidance and achieved a record high non-GAAP operating
margin in Q2. The company is aligned and focused, and we enter the
second half of the year with significant momentum." 
Recent Highlights & Strategic Announcements  


 
--  On May 21, 2013, VMware unveiled VMware vCloud(R) Hybrid
    Service(TM), an Infrastructure as a Service ("IaaS") cloud operated
    by VMware and built on the trusted foundation of VMware vSphere(R),
    giving customers a common platform to seamlessly extend their data
    center to the cloud.
    
    
--  On May 22, 2013, VMware and SAP AG announced a new model to deliver
    SAP Core Solutions and SAP HANA(R) in the newly announced VMware
    vCloud(R) Hybrid Service(TM). The joint offering is designed to
    allow customers to consume SAP solutions on VMware vCloud Hybrid
    Service in a true Opex model with subscription pricing for both
    software and infrastructure services. The joint offering is expected
    to deliver a fully managed subscription service offered by VMware
    on-premise, in the cloud or within hybrid deployments.
    
    
--  On June 10, 2013, VMware announced that NTT Communications ("NTT
    Com"), the cloud service provider of one of the world's largest
    telecommunications companies NTT Group, will deploy VMware network
    virtualization as a core technology for its new cloud service,
    Enterprise Cloud ("EC").  By incorporating VMware network
    virtualization into its EC service, NTT Com will provide seamless and
    flexible connectivity between customer data centers and the NTT Com
    cloud without changing the IP addresses of a customer's existing,
    on-premise environment.
    
    
--  On June 11, 2013, VMware introduced VMware(R) vCenter(TM) Log
    Insight(TM), a new automated log management and analytics product
    for the Cloud Era. By extending analytics to logs, VMware enables IT
    organizations to gain real-time insights from vast amounts of log data
    generated by applications, physical hardware and virtualized
    infrastructure, helping to minimize troubleshooting times as well as
    improve operational efficiency and reduce IT costs.
    
    
--  In May and June of 2013, VMware made announcements regarding VMware
    vSphere(R) integration with Apache Hadoop.  MapR Technologies, Inc.
    and VMware announced that MapR's Distribution for Apache Hadoop is now
    certified for VMware vSphere. In addition, Cloudera and VMware
    announced that Cloudera Enterprise is now certified to run on vSphere.
    Through the VMware Ready(TM) program, VMware and Cloudera completed
    a detailed joint validation process, which enables enterprises to
    simplify and accelerate the use of Apache Hadoop within virtual and
    cloud environments.

  
The company will host a conference call today at 2:00 p.m. PT/ 5:00
p.m. ET to review financial results and business outlook. A live web
broadcast of the event will be available on the VMware Investor
Relations website at http://ir.vmware.com. Slides will accompany the
web broadcast. The replay of the webcast and slides will be available
on the website for two months. In addition, six quarters of
historical data for revenue and unearned revenue, excluding revenue
generated each period by the products and services contributed to
GoPivotal on April 1, 2013 and the products and services associated
with the divestures that occurred in 2013, will also be made
available at http://ir.vmware.com in conjunction with the conference
call. Please also note that beginning with the third quarter of 2013,
VMware will provide forward-looking guidance that it presents in
connection with quarterly earnings announcements only on its
quarterly earnings conference calls. VMware does not plan to provide
this information in its quarterly earnings press releases.   
(1)Comparative growth percentages exclude revenues in each period
attributable to the products and services contributed to GoPivotal,
Inc. and the products and services associated with divestitures
consummated by VMware in 2013. On a GAAP basis, the range of expected
annual 2013 revenues represents growth rates of 11% to 14%, the range
of expected annual license revenues represents growth rates of 6% to
10%, the range of expected third quarter 2013 revenues represents
growth rates of 12% to 15% and the range of expected third quarter
2013
 license revenues represents growth rates of  9% to 13%. 
About VMware  
VMware is the leader in virtualization and cloud infrastructure
solutions that enable businesses to thrive in the Cloud Era.
Customers rely on VMware to help them transform the way they build,
deliver and consume Information Technology resources in a manner that
is evolutionary and based on their specific needs. With 2012 revenues
of $4.61 billion, VMware has more than 500,000 customers and 55,000
partners.  The company is headquartered in Silicon Valley with
offices throughout the world and can be found online at
www.vmware.com. 
Additional Information 
Our website is located at www.vmware.com, and our investor relations
website is located at http://ir.vmware.com. Our goal is to maintain
the investor relations website as a portal through which investors
can easily find or navigate to pertinent information about us, all of
which is made available free of charge. The additional information
includes materials that we file with the SEC; announcements of
investor conferences and events at which our executives talk about
our products, services and competitive strategies; webcasts of our
quarterly earnings calls, investor conferences and events (archives
of which are also available for a limited time); additional
information on our financial metrics, including reconciliations of
non-GAAP financial measures to the most directly comparable GAAP
measures; press releases on quarterly earnings, product and service
announcements, legal developments and international news; corporate
governance information; and other news, blogs and announcements that
we may post from time to time that investors may find useful or
interesting. 
VMware, VMware Ready, VMware vCloud, vCloud Hybrid Service, vSphere,
VMware vCenter, and vCenter Log Insight are registered trademarks or
trademarks of VMware, Inc. in the United States and other
jurisdictions. All other marks and names mentioned herein may be
trademarks of their respective organizations. 
Use of Non-GAAP Financial Measures 
Reconciliations of non-GAAP financial measures to VMware's financial
results as determined in accordance with GAAP are included at the end
of this press release following the accompanying financial data. For
a description of these non-GAAP financial measures, including the
reasons management uses each measure, please see the section of the
tables titled "About Non-GAAP Financial Measures." 
Forward-Looking Statements 
This press release contains forward-looking statements including,
among other things, statements regarding VMware's expected third
quarter and annual revenue and license revenue projections, VMware's
market opportunity in the second half of 2013 and beyond, VMware's
continued success and momentum, expectations regarding future
services and products, expectations regarding future customers and
the benefits of products, and expectations regarding VMware's
guidance practices in the future. These forward-looking statements
are subject to the safe harbor provisions created by the Private
Securities Litigation Reform Act of 1995. Actual results could differ
materially from those projected in the forward-looking statements as
a result of certain risk factors, including but not limited to: (i)
adverse changes in general economic or market conditions; (ii) delays
or reductions in consumer, government and information technology
spending; (iii) competitive factors, including but not limited to
pricing pressures, industry consolidation, entry of new competitors
into the virtualization market, and new product and marketing
initiatives by our competitors; (iv) factors that affect timing of
license revenue recognition such as product announcements and
promotions and beta programs; (v) our customers' ability to develop,
and to transition to, new products and computing strategies such as
cloud computing, desktop virtualization and the software defined data
center; (vi) the uncertainty of customer acceptance of emerging
technology; (vii) changes in the willingness of customers to enter
into longer term licensing and support arrangements; (viii) rapid
technological and market changes in virtualization software and
platforms for cloud, end user and mobile computing; (ix) changes to
product development timelines; (x) VMware's relationship with EMC
Corporation and EMC's ability to control matters requiring
stockholder approval, including the election of VMware's board
members; (xi) our ability to protect our proprietary technology;
(xii) our ability to attract and retain highly qualified employees;
(xiii) the successful integration of acquired companies and assets
into VMware; and (xiv) fluctuating currency exchange rates. These
forward-looking statements are based on current expectations and are
subject to uncertainties and changes in condition, significance,
value and effect as well as other risks detailed in documents filed
with the Securities and Exchange Commission, including our most
recent reports on Form 10-K and Form 10-Q and current reports on Form
8-K that we may file from time to time, which could cause actual
results to vary from expectations. VMware assumes no obligation to,
and does not currently intend to, update any such forward-looking
statements after the date of this release. 


 
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                     CONSOLIDATED STATEMENTS OF INCOME                      
                  (in millions, except per share amounts)                   
                                (unaudited)                                 
                                                                            
                                 For the Three Months   For the Six Months  
                                         Ended                 Ended        
                                       June 30,              June 30,       
                                 --------------------  -------------------- 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
                                                                            
Revenues:                                                                   
   License                       $   530.5  $   517.2  $ 1,018.7  $   999.1 
   Services                          712.6      605.8    1,415.9    1,179.1 
                                 ---------  ---------  ---------  --------- 
Total revenues                     1,243.1    1,123.0    2,434.6    2,178.2 
Operating expenses (1):                                                     
   Cost of license revenues           54.6       56.6      111.9      113.3 
   Cost of services revenues         118.5      122.7      243.1      236.8 
   Research and development          260.7      248.6      531.2      471.0 
   Sales and marketing               442.1      391.5      859.5      754.9 
   General and administrative         96.3       91.7      194.8      173.1 
   Realignment charges                 0.6         --       63.5         -- 
      
                           ---------  ---------  ---------  --------- 
Operating income                     270.3      211.9      430.6      429.1 
Investment income                      7.0        6.9       14.8       12.7 
Interest expense with EMC             (0.9)      (1.2)      (1.9)      (2.4)
Other income (expense), net           16.9       (3.5)      13.9       (1.4)
                                 ---------  ---------  ---------  --------- 
Income before income taxes           293.3      214.1      457.4      438.0 
Income tax provision                  49.2       22.4       39.7       54.8 
                                 ---------  ---------  ---------  --------- 
Net income                       $   244.1  $   191.7  $   417.7  $   383.2 
                                 =========  =========  =========  ========= 
                                                                            
Net income per weighted-average                                             
 share, basic for Class A and                                               
 Class B                         $    0.57  $    0.45  $    0.98  $    0.90 
                                                                            
Net income per weighted-average                                             
 share, diluted for Class A and                                             
 Class B                         $    0.57  $    0.44  $    0.97  $    0.88 
                                                                            
Weighted-average shares, basic                                              
 for Class A and Class B             428.3      427.2      428.2      426.1 
Weighted-average shares, diluted                                            
 for Class A and Class B             432.0      434.6      432.4      434.0 
                                                                            
(1) Includes stock-based                                                    
 compensation as follows:                                                   
   Cost of license revenues      $     0.5  $     0.5  $     1.0  $     1.0 
   Cost of services revenues           6.7        7.1       14.0       12.9 
   Research and development           51.0       48.0      113.3       87.4 
   Sales and marketing                33.4       33.9       69.5       59.1 
   General and administrative         11.6       11.4       25.7       22.3 
   Realignment charges                 0.3         --        5.7         -- 
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                         CONSOLIDATED BALANCE SHEETS                        
                   (in millions, except per share amounts)                  
                                 (unaudited)                                
                                                                            
                                                   June 30,     December 31,
                                                     2013           2012    
                                                 ------------  -------------
                                                                            
                     ASSETS                                                 
Current assets:                                                             
    Cash and cash equivalents                    $    1,839.7  $     1,609.3
    Short-term investments                            3,483.3        3,021.5
    Accounts receivable, net of allowance for                               
     doubtful accounts of $2.1 and $4.3                 940.9        1,150.9
    Due from EMC, net                                    33.7           67.9
    Deferred tax asset                                  158.5          179.4
    Other current assets                                127.8           91.0
                                                 ------------  -------------
Total current assets                                  6,583.9        6,120.0
Property and equipment, net                             742.8          664.7
Other assets, net                                       107.3          128.7
Deferred tax asset                                      118.8          103.0
Intangible assets, net                                  627.3          731.9
Goodwill                                              2,966.4        2,848.1
                                                 ------------  -------------
      Total assets                               $   11,146.5  $    10,596.4
                                                 ============  =============
                                                                            
      LIABILITIES AND STOCKHOLDERS' EQUITY                                  
Current liabilities:                                                        
    Accounts payable                             $       87.3  $        89.6
    Accrued expenses and other                          661.4          674.7
    Unearned revenues                                 2,230.2        2,195.9
                                                 ------------  -------------
Total current liabilities                             2,978.9        2,960.2
Note payable to EMC                                     450.0          450.0
Unearned revenues                                     1,366.2        1,264.6
Other liabilities                                       195.1          181.6
                                                 ------------  -------------
      Total liabilities                               4,990.2        4,856.4
Contingencies                                                               
Stockholders' equity:                                                       
  Class A common stock, par value $.01;                                     
   authorized 2,500 shares; issued and                                      
   outstanding 129.9 and 128.7 shares                     1.3            1.3
  Class B convertible common stock, par value                               
   $.01; authorized 1,000 shares; issued and                                
   outstanding 300 shares                                 3.0            3.0
  Additional paid-in capital                          3,440.7        3,431.7
  Accumulated other comprehensive income (loss)          (4.7)           5.7
  Retained earnings                                   2,716.0        2,298.3
                                                 ------------  -------------
      Total stockholders' equity                      6,156.3        5,740.0
                                                 ------------  -------------
        Total liabilities and stockholders'                                 
         equity                                  $   11,146.5  $    10,596.4
                                                 ============  =============
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                               (in millions)                                
                                (unaudited)                                 
                                                                            
                                 For the Three Months   For the Six Months  
        
                                 Ended                 Ended        
                                       June 30,              June 30,       
                                 --------------------  -------------------- 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
                                                                            
Operating activities:                                                       
Net income                       $   244.1  $   191.7  $   417.7  $   383.2 
Adjustments to reconcile net                                                
 income to net cash provided by                                             
 operating activities:                                                      
  Depreciation and amortization       87.0       89.4      178.3      175.2 
  Stock-based compensation           103.2      100.9      219.2      182.7 
  Excess tax benefits from                                                  
   stock-based compensation          (25.6)     (32.7)     (47.8)     (86.4)
  Non-cash realignment charges         0.3         --       14.8         -- 
  Gain on disposition of certain                                            
   lines of business and other,                                             
   net                               (19.3)        --      (19.3)        -- 
  Other                                1.0        0.4       (1.2)      (0.6)
  Changes in assets and                                                     
   liabilities, net of                                                      
   acquisitions:                                                            
    Accounts receivable             (172.6)     (91.3)     207.6      135.3 
    Other assets                     (34.2)     (69.6)     (75.0)    (117.1)
    Due to/from EMC, net             (25.2)     (43.4)      34.3       12.1 
    Accounts payable                  26.6        4.9       18.3       17.4 
    Accrued expenses                  94.1       95.8      (21.2)       0.9 
    Income taxes receivable from                                            
     EMC                              15.5         --       15.5         -- 
    Income taxes payable              (4.1)      12.4       (2.3)      67.7 
    Deferred income taxes, net        37.1       (1.4)       8.9      (36.4)
    Unearned revenues                206.2      134.2      262.9      233.9 
                                 ---------  ---------  ---------  --------- 
Net cash provided by operating                                              
 activities                          534.1      391.3    1,210.7      967.9 
                                 ---------  ---------  ---------  --------- 
                                                                            
Investing activities:                                                       
Additions to property and                                                   
 equipment                           (76.1)     (44.3)    (153.9)     (78.0)
Purchases of available-for-sale                                             
 securities                         (917.4)  (1,253.6)  (1,654.3)  (1,955.1)
Sales of available-for-sale                                                 
 securities                          333.6      348.4      819.2      770.8 
Maturities of available-for-sale                                            
 securities                          187.7      277.1      369.7      534.1 
Proceeds from disposition of                                                
 certain lines of business            30.0         --       30.9         -- 
Business acquisitions, net of                                               
 cash acquired                          --     (102.2)    (184.5)    (102.2)
Other investing                       (1.0)      (2.6)      (2.1)      (4.2)
                                 ---------  ---------  ---------  --------- 
Net cash used in investing                                                  
 activities                         (443.2)    (777.2)    (775.0)    (834.6)
                                 ---------  ---------  ---------  --------- 
                                                                            
Financing activities:                                                       
Proceeds from issuance of common                                            
 stock                                47.2       33.6      115.1      144.6 
Repurchase of common stock          (120.0)    (178.2)    (302.0)    (178.2)
Excess tax benefits from stock-                                             
 based compensation                   25.6       32.7       47.8       86.4 
Shares repurchased for tax                                                  
 withholdings on vesting of                                                 
 restricted stock                    (44.1)     (51.4)     (66.2)     (65.0)
                                 ---------  ---------  ---------  --------- 
Net cash used in financing                                                  
 activities                          (91.3)    (163.3)    (205.3)     (12.2)
                                 ---------  ---------  ---------  --------- 
Net increase (decrease) in cash                                             
 and cash equivalents                 (0.4)    (549.2)     230.4      121.1 
Cash and cash equivalents at                                                
 beginning of the period           1,840.1    2,626.1    1,609.3    1,955.8 
                                 ---------  ---------  ---------  --------- 
Cash and cash equivalents at end                                            
 of the period                   $ 1,839.7  $ 2,076.9  $ 1,839.7  $ 2,076.9 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                       SUPPLEMENTAL REVENUES SCHEDULE                       
             (INCLUDES RECONCILIATION OF GAAP TO NON-GAAP DATA)             
                               (in millions)                                
                                (unaudited)                                 
                                                                            
                   For the Three                                            
                   Months Ended            For the Three Months Ended       
                ------------------  --------------------------------------- 
                June 30,    March   December  September  June 30,    March  
                  2013    31, 2013  31, 2012   30, 2012    2012    31, 2012 
                --------  --------  --------  ---------  --------  -------- 
Revenues as                                                                 
 reported (1):                                                              
  License       $  530.5  $  488.2  $  596.7  $   491.1  $  517.2  $  481.9 
  Software                                                                  
   maintenance     614.3     605.4     591.0      550.6     519.1     492.3 
  Professional                                                              
   services         98.3      97.9     105.5       92.0      86.7      81.0 
                --------  --------  --------  ---------  --------  -------- 
Total revenues  $1,243.1  $1,191.5  $1,293.2  $ 1,133.7  $1,123.0  $1,055.2 
                ========  ========  ========  =========  ========  ======== 
                                                                            
Change (%)
 over                                                             
 prior year                                                                 
  License            2.6%      1.3%     16.1%      10.7%     11.3%     15.0%
  Software                                                                  
   maintenance      18.3%     23.0%     27.5%      29.0%     34.4%     35.3%
  Professional                                                              
   services         13.4%     20.8%     27.0%      28.6%     23.7%     33.0%
                --------  --------  --------  ---------  --------  -------- 
Total revenues      10.7%     12.9%     22.0%      20.4%     21.9%     25.1%
                ========  ========  ========  =========  ========  ======== 
                                                                            
Revenues as                                                                 
 reported,                                                                  
 excluding                                                                  
 GoPivotal (2)                                                              
  License       $  530.5  $  484.7  $  589.1  $   486.0  $  508.0  $  477.8 
  Software                                                                  
   maintenance     614.3     601.2     586.8      546.5     515.0     488.8 
  Professional                                                              
   services         98.3      83.7      77.6       71.4      67.7      69.8 
                --------  --------  --------  ---------  --------  -------- 
Total revenues  $1,243.1  $1,169.6  $1,253.5  $ 1,103.9  $1,090.7  $1,036.4 
                ========  ========  ========  =========  ========  ======== 
                                                                            
Change (%) over                                                             
 prior year                                                                 
  License            4.4%      1.5%     15.7%      11.2%      9.8%     15.1%
  Software                                                                  
   maintenance      19.3%     23.0%     27.5%      28.9%     34.3%     35.0%
  Professional                                                              
   services         45.1%     19.8%      6.4%      12.3%      8.3%     24.3%
                --------  --------  --------  ---------  --------  -------- 
Total revenues      14.0%     12.8%     20.3%      19.4%     20.0%     24.4%
                ========  ========  ========  =========  ========  ======== 
                                                                            
Revenues as                                                                 
 reported,                                                                  
 excluding                                                                  
 GoPivotal and                                                              
 all                                                                        
 dispositions                                                               
 (3)                                                                        
  License       $  526.3  $  475.9  $  581.0  $   479.2  $  499.8  $  470.6 
  Software                                                                  
   maintenance     610.9     589.8     574.1      534.7     503.6     478.1 
  Professional                                                              
   services         97.8      83.1      77.4       70.4      67.2      69.3 
                --------  --------  --------  ---------  --------  -------- 
Total revenues  $1,235.0  $1,148.8  $1,232.5  $ 1,084.3  $1,070.6  $1,018.0 
                ========  ========  ========  =========  ========  ======== 
                                                                            
Change (%) over                                                             
 prior year                                                                 
  License            5.3%      1.1%     16.0%      11.8%      9.2%     14.5%
  Software                                                                  
   maintenance      21.3%     23.4%     27.2%      28.5%     33.1%     33.7%
  Professional                                                              
   services         45.6%     19.9%      6.3%      11.3%      8.1%     24.3%
                --------  --------  --------  ---------  --------  -------- 
Total revenues      15.4%     12.9%     20.3%      19.4%     19.2%     23.5%
                ========  ========  ========  =========  ========  ======== 
                                                                            
Reconciliation                                                              
 of "revenues as                                                            
 reported" to                                                               
 "revenues as                                                               
 reported,                                                                  
 excluding                                                                  
 GoPivotal and                                                              
 all                                                                        
 dispositions":                                                             
                                                                            
Revenues as                                                                 
 reported,                                                                  
 excluding                                                                  
 GoPivotal and                                                              
 all                                                                        
 dispositions                                                               
 (3)            $1,235.0  $1,148.8  $1,232.5  $ 1,084.3  $1,070.6  $1,018.0 
  GoPivotal            -      21.9      39.7       29.7      32.3      18.7 
  All                                                                       
   dispositions      8.1      20.8      21.0       19.7      20.1      18.5 
                --------  --------  --------  ---------  --------  -------- 
Revenues as                                                                 
 reported (1)   $1,243.1  $1,191.5  $1,293.2  $ 1,133.7  $1,123.0  $1,055.2 
                ========  ========  ========  =========  ========  ======== 
                                                                            
(1) Represents revenues reported each quarter.                              
                                                                            
(2) Represents revenues reported each quarter less the revenues attributable
    to products and services contributed by VMware to GoPivotal, Inc.       
    ("GoPivotal") on April 1, 2013. All quarters have been adjusted to      
    exclude the related revenues.                                           
                                                                            
(3) Represents revenues reported each quarter less a) the revenues          
    attributable to products and services contributed by VMware to GoPivotal
    on April 1, 2013 and b) the revenues attributable to all lines of       
    businesses which were disposed of in 2013, including Zimbra which was   
    disposed of in July 2013. All quarters have been adjusted to exclude the
    related revenues.                                                       
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
            
      SUPPLEMENTAL UNEARNED REVENUES SCHEDULE                   
             (INCLUDES RECONCILIATION OF GAAP TO NON-GAAP DATA)             
                               (in millions)                                
                                (unaudited)                                 
                                                                            
                June 30,   March    December  September  June 30,   March   
                  2013    31, 2013  31, 2012   30, 2012    2012    31, 2012 
                --------  --------  --------  ---------  --------  -------- 
Unearned                                                                    
 revenues as                                                                
 reported (1)                                                               
  License       $  427.2  $  446.2  $  462.7  $   366.1  $  375.6  $  373.0 
  Software                                                                  
   maintenance   2,903.3   2,796.5   2,755.0    2,415.3   2,357.0   2,245.7 
  Professional                                                              
   services        265.9     247.5     242.9      211.9     209.8     189.4 
                --------  --------  --------  ---------  --------  -------- 
Total unearned                                                              
 revenues       $3,596.4  $3,490.2  $3,460.6  $ 2,993.3  $2,942.4  $2,808.1 
                ========  ========  ========  =========  ========  ======== 
                                                                            
Change (%) over                                                             
 prior year                                                                 
  License           13.7%     19.6%     18.9%      35.8%     56.5%     48.4%
  Software                                                                  
   maintenance      23.2%     24.5%     29.1%      33.8%     39.8%     41.3%
  Professional                                                              
   services         26.8%     30.6%     30.8%      32.5%     37.9%     37.3%
                --------  --------  --------  ---------  --------  -------- 
Total unearned                                                              
 revenues           22.2%     24.3%     27.8%      34.0%     41.6%     41.9%
                ========  ========  ========  =========  ========  ======== 
                                                                            
Unearned                                                                    
 revenues as                                                                
 reported,                                                                  
 excluding                                                                  
 GoPivotal and                                                              
 all                                                                        
 dispositions                                                               
 (2)                                                                        
  License       $  427.2  $  406.9  $  414.1  $   327.4  $  336.1  $  351.7 
  Software                                                                  
   maintenance   2,903.3   2,736.1   2,671.2    2,345.9   2,288.9   2,189.1 
  Professional                                                              
   services        265.9     245.8     240.6      209.7     206.6     186.6 
                --------  --------  --------  ---------  --------  -------- 
Total unearned                                                              
 revenues       $3,596.4  $3,388.8  $3,325.9  $ 2,883.0  $2,831.6  $2,727.4 
                ========  ========  ========  =========  ========  ======== 
                                                                            
Change (%) over                                                             
 prior year                                                                 
  License           27.1%     15.7%     11.6%      25.9%     49.4%     45.4%
  Software                                                                  
   maintenance      26.8%     25.0%     28.5%      33.3%     38.7%     40.4%
  Professional                                                              
   services         28.7%     31.7%     30.8%      31.9%     36.2%     36.0%
                --------  --------  --------  ---------  --------  -------- 
Total unearned                                                              
 revenues           27.0%     24.3%     26.3%      32.3%     39.7%     40.7%
                ========  ========  ========  =========  ========  ======== 
                                                                            
Reconciliation                                                              
 of "unearned                                                               
 revenues as                                                                
 reported" to                                                               
 "unearned                                                                  
 revenues as                                                                
 reported,                                                                  
 excluding                                                                  
 GoPivotal and                                                              
 all                                                                        
 dispositions":                                                             
                                                                            
Unearned                                                                    
 revenues as                                                                
 reported,                                                                  
 excluding                                                                  
 GoPivotal and                                                              
 all                                                                        
 dispositions                                                               
 (2)            $3,596.4  $3,388.8  $3,325.9  $ 2,883.0  $2,831.6  $2,727.4 
  GoPivotal and                                                             
   all                                                                      
   dispositions        -     101.4     134.7      110.3     110.8      80.7 
                --------  --------  --------  ---------  --------  -------- 
Unearned                                                                    
 revenues as                                                                
 reported (1)   $3,596.4  $3,490.2  $3,460.6  $ 2,993.3  $2,942.4  $2,808.1 
                ========  ========  ========  =========  ========  ======== 
                                                                            
(1) Represents unearned revenues reported each quarter.                     
                                                                            
(2) Represents unearned revenues reported each quarter less a) the unearned 
    revenues attributable to products and services contributed by VMware to 
    GoPivotal on April 1, 2013 and b) the unearned revenues attributable to 
    all lines of businesses which were disposed of in 2013, including Zimbra
    which was disposed of in July 2013. All quarters have been adjusted to  
    exclude the related unearned revenues.                                  
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
              
     RECONCILIATION OF GAAP TO NON-GAAP DATA                  
                  For the Three Months Ended June 30, 2013                  
                   (in millions, except per share amounts)                  
                                 (unaudited)                                
                                                                           
                                       Employer                            
                                       Payroll                             
                                        Taxes                              
                                     on Employee                           
                        Stock-Based     Stock     Intangible   Realignment 
                 GAAP   Compensation Transactions Amortization   Charges   
                ------  -----------  -----------  -----------  ----------- 
                                                                           
Operating                                                                  
 expenses:                                                                 
  Cost of                                                                  
   license                                                                 
   revenues     $ 54.6         (0.5)           -        (22.2)           - 
  Cost of                                                                  
   services                                                                
   revenues     $118.5         (6.7)        (0.2)        (0.8)           - 
  Research and                                                             
   development  $260.7        (51.0)        (1.5)        (0.8)           - 
  Sales and                                                                
   marketing    $442.1        (33.4)        (1.4)        (1.6)           - 
  General and                                                              
   administra-                                                            
   tive         $ 96.3        (11.6)        (0.5)           -            - 
  Realignment                                                              
   charges      $  0.6            -            -            -         (0.6)
                                                                           
Operating                                                                  
 income         $270.3        103.2          3.6         25.4          0.6 
Operating                                                                  
 margin           21.7%         8.3%         0.3%         2.0%         0.1%
                                                                           
Other income                                                               
 (expense), net $ 16.9            -            -            -            - 
                                                                           
Income before                                                              
 income taxes   $293.3        103.2          3.6         25.4          0.6 
                                                                           
Income tax                                                                 
 provision      $ 49.2                                                     
Tax rate          16.8%                                                    
                                                                           
Net income      $244.1        103.2          3.6         25.4          0.6 
                                                                           
Net income per                                                             
 weighted-                                                                 
 average share,                                                            
 basic for                                                                 
 Class A and                                                               
 Class B (3)    $ 0.57  $      0.24  $      0.01  $      0.06  $         - 
                                                                           
Net income per                                                             
 weighted-                                                                 
 average share,                                                            
 diluted for                                                               
 Class A and                                                               
 Class B (4)    $ 0.57  $      0.24  $         -  $      0.06  $         - 
 
                                  
                                    table continued below
                           
                                                 
                                           Gain on                          
                                          Disposition                        
                Acquisition  Capitalized  of Certain                        
                 and Other    Software     Lines of      Tax      Non-GAAP, 
                  Related   Development   Business &  Adjustment      as    
                  Items       Costs (1)   Other, Net      (2)      adjusted 
                ----------  -----------  -----------  ----------  --------- 
                                                                            
Operating                                                                   
 expenses:                                                                  
  Cost of                                                                   
   license                                                                  
   revenues              -        (13.2)           -           -  $    18.7 
  Cost of                                                                   
   services                                                                 
   revenues              -            -            -           -  $   110.8 
  Research and                                                              
   development           -            -            -           -  $   207.4 
  Sales and                                                                 
   marketing             -            -            -           -  $   405.7 
  General and                                                               
   administra-                                                             
   tive               (0.6)           -            -           -  $    83.6 
  Realignment                                                               
   charges               -            -            -           -  $       - 
                                                                            
Operating                                                                   
 income                0.6         13.2            -           -  $   416.9 
Operating                                                                   
 margin                  -          1.1%           -           -       33.5%
                                                                            
Other income                                                                
 (expense), net          -            -        (18.9)          -  $    (2.0)
                                                                            
Income before                                                               
 income taxes          0.6         13.2        (18.9)          -  $   421.0 
                                                                            
Income tax                                                                  
 provision                                                  28.7  $    77.9 
Tax rate                                                               18.5%
                                                                            
Net income             0.6         13.2        (18.9)      (28.7) $   343.1 
                                                     
                       
Net income per                                                              
 weighted-                                                                  
 average share,                                                             
 basic for                                                                  
 Class A and                                                                
 Class B (3)    $        -  $      0.03  $     (0.04) $    (0.07) $    0.80 
                                                                            
Net income per                                                              
 weighted-                                                                  
 average share,                                                             
 diluted for                                                                
 Class A and                                                                
 Class B (4)    $        -  $      0.03  $     (0.04) $    (0.07) $    0.79 
                                                                            
(1) For the second quarter of 2013, no costs were capitalized for the       
    development of software products. Amortization expense from previously  
    capitalized amounts was $13.2.                                          
                                                                            
(2) Non-GAAP financial information for the quarter is adjusted for a tax    
    rate equal to our annual estimated tax rate on non-GAAP income. This    
    rate is based on our estimated annual GAAP income tax rate forecast,    
    adjusted to account for items excluded from GAAP income in calculating  
    the non-GAAP financial measures presented above. Our estimated tax rate 
    on non-GAAP income is determined annually and may be adjusted during the
    year to take into account events or trends that we believe materially   
    impact the estimated annual rate including, but not limited to,         
    significant changes resulting from tax legislation, material changes in 
    the geographic mix of revenues and expenses and other significant       
    events. Due to the differences in the tax treatment of items excluded   
    from non-GAAP earnings, as well as the methodology applied to our       
    estimated annual tax rates as described above, our estimated tax rate on
    non-GAAP income may differ from our GAAP tax rate and from our actual   
    tax liabilities.                                                        
                                                                            
(3) Calculated based upon 428.3 basic weighted-average shares for Class A   
    and Class B.                                                            
                                                                            
(4) Calculated based upon 432.0 diluted weighted-average shares for Class A 
    and Class B.                                                            
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                   RECONCILIATION OF GAAP TO NON-GAAP DATA                  
                  For the Three Months Ended June 30, 2012                  
                   (in millions, except per share amounts)                  
                                 (unaudited)                                
                                                                            
                                                                            
                                                  Employer                  
                                                   Payroll                  
                                                    Taxes                   
                                                 on Employee                
                                   Stock-Based      Stock      Intangible   
                           GAAP   Compensation  Transactions  Amortization  
                          ------  ------------  ------------  ------------  
                                                                            
Operating expenses:                                                         
Cost of license revenues  $ 56.6          (0.5)         (0.1)        (13.7) 
Cost of services revenues $122.7          (7.1)         (0.4)         (1.1) 
Research and development  $248.6         (48.0)         (2.1)         (0.8) 
Sales and marketing       $391.5         (33.9)         (1.4)         (2.9) 
General and                                                                 
 administrative           $ 91.7         (11.4)         (0.4)            -  
                                                                            
Operating income          $211.9         100.9           4.4          18.5  
Operating margin            18.9%          9.0%          0.5%          1.6% 
                                                                            
Income before income                                                        
 taxes                    $214.1         100.9           4.4          18.5  
                                                                            
Income tax provision      $ 22.4                                            
Tax rate                    10.5%                                           
                                                                            
Net income                $191.7         100.9           4.4          18.5  
                                                                            
Net income per weighted-                                                    
 average share, basic for                                                   
 Class A and Class B (3)  $ 0.45  $       0.24  $       0.01  $       0.04  
                                                                            
Net income per weighted-                                                    
 average share, diluted                                                     
 for Class A and Class B                                                    
 (4)                      $ 0.44  $       0.23  $       0.01  $       0.04  
                                                                            
 
                                     table continued below
                                                                        
                                                                         
                         Acquisition  Capitalized                        
                           Related      Software      Tax      Non-GAAP, 
                          Items and   Development  Adjustment      as    
                            Other      Costs (1)       (2)      adjusted 
                         -----------  -----------  ----------  --------- 
                                                                         
Operating expenses:                                                      
Cost of license revenues           -        (20.8)          -  $    21.5 
Cost of services revenues          -            -           -  $   114.1 
Research and development           -            -           -  $   197.7 
Sales and marketing                -            -           -  $   353.3 
General and                                                              
 administrative                 (1.7)           -           -  $    78.2 
                                                                         
Operating income                 1.7         20.8           -  $   358.2 
Operating margin                 0.1%         1.8%          -       31.9%
                                                
                         
Income before income                                                     
 taxes                           1.7         20.8           -  $   360.4 
                                                                         
Income tax provision                                     42.5  $    64.9 
Tax rate                                                            18.0%
                                                                         
Net income                       1.7         20.8       (42.5) $   295.5 
                                                                         
Net income per weighted-                                                 
 average share, basic for                                                
 Class A and Class B (3) $         -  $      0.05  $    (0.10) $    0.69 
                                                                         
Net income per weighted-                                                 
 average share, diluted                                                  
 for Class A and Class B                                                 
 (4)                     $         -  $      0.05  $    (0.09) $    0.68 
                                                                         
                                                                            
(1) For the second quarter of 2012, no costs were capitalized for the       
    development of software products. Amortization expense from previously  
    capitalized amounts was $20.8.                                          
                                                                            
(2) Non-GAAP financial information for the quarter is adjusted for a tax    
    rate equal to our annual estimated tax rate on non-GAAP income. This    
    rate is based on our estimated annual GAAP income tax rate forecast,    
    adjusted to account for items excluded from GAAP income in calculating  
    the non-GAAP financial measures presented above. Our estimated tax rate 
    on non-GAAP income is determined annually and may be adjusted during the
    year to take into account events or trends that we believe materially   
    impact the estimated annual rate including, but not limited to,         
    significant changes resulting from tax legislation, material changes in 
    the geographic mix of revenues and expenses and other significant       
    events. Due to the differences in the tax treatment of items excluded   
    from non-GAAP earnings, as well as the methodology applied to our       
    estimated annual tax rates as described above, our estimated tax rate on
    non-GAAP income may differ from our GAAP tax rate and from our actual   
    tax liabilities.                                                        
                                                                            
(3) Calculated based upon 427.2 basic weighted-average shares for Class A   
    and Class B.                                                            
                                                                            
(4) Calculated based upon 434.6 diluted weighted-average shares for Class A 
    and Class B.                                                            
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                   RECONCILIATION OF GAAP TO NON-GAAP DATA                  
                   For the Six Months Ended June 30, 2013                   
                   (in millions, except per share amounts)                  
                                 (unaudited)                                
                                                                            
                                       Employer                            
                                       Payroll                             
                                        Taxes                              
                                     on Employee                           
                        Stock-Based     Stock     Intangible   Realignment 
                 GAAP   Compensation Transactions Amortization   Charges   
                ------  -----------  -----------  -----------  -----------   
                                                                            
Operating                                                                   
 expenses:                                                                  
  Cost of                                                                   
   license                                                                  
   revenues     $111.9         (1.0)           -        (45.5)           -  
  Cost of                                                                   
   services                                                                 
   revenues     $243.1        (14.0)        (0.4)        (1.8)           -  
  Research and                                                              
   development  $531.2       (113.3)        (2.5)        (1.8)           -  
  Sales and                                                                 
   marketing    $859.5        (69.5)        (2.1)        (4.2)           -  
  General and                                                               
   adminis-                                                           
   trative      $194.8        (25.7)        (0.5)           -            -  
  Realignment                                                               
   charges      $ 63.5            -            -            -        (63.5) 
                                                                            
Operating
 income         $430.6        223.5          5.5         53.3         63.5  
Operating margin  17.7%         9.2%         0.2%         2.2%         2.6% 
                                                                            
Other income                                                                
 (expense), net $ 13.9            -            -            -            -  
                                                                            
Income before                                                               
 income taxes   $457.4        223.5          5.5         53.3         63.5  
                                                                            
Income tax                                                                  
 provision      $ 39.7                                                      
Tax rate           8.7%                                                     
                                                                            
Net income      $417.7        223.5          5.5         53.3         63.5  
                                                                            
Net income per                                                              
 weighted-                                                                  
 average share,                                                             
 basic for Class                                                            
 A and Class B                                                              
 (3)            $ 0.98  $      0.52  $      0.02  $      0.12  $      0.15  
                                                                            
Net income per                                                              
 weighted-                                                                  
 average share,                                                             
 diluted for                                                                
 Class A and              
                                                  
 Class B (4)    $ 0.97  $      0.52  $      0.01  $      0.12  $      0.15  
                                                                            
                               
                                   table continued below
 
                                                                            
                                           Gain on                          
                                          Disposition                        
                Acquisition Capitalized   of Certain                        
                 and Other    Software     Lines of      Tax      Non-GAAP, 
                  Related   Development   Business &  Adjustment      as    
                   Items     Costs (1)    Other, Net      (2)      adjusted 
                ----------  -----------  -----------  ----------  --------- 
                                                                            
Operating                                                                   
 expenses:                                                                  
  Cost of                                                                   
   license                                                                  
   revenues              -        (26.3)           -           -  $    39.1 
  Cost of                                                                   
   services                                                                 
   revenues              -            -            -           -  $   226.9 
  Research and                                                              
   development           -            -            -           -  $   413.6 
  Sales and                                                                 
   marketing             -            -            -           -  $   783.7 
  General and                                                               
   administrative     (1.8)           -            -           -  $   166.8 
  Realignment                                                               
   charges               -            -            -           -  $       - 
                                                                            
Operating income       1.8         26.3            -           -  $   804.5 
Operating margin         -          1.1%           -           -       33.0%
                                                                            
Other income                                                                
 (expense), net          -            -        (18.9)          -  $    (5.0)
                                                                            
Income before                                                               
 income taxes          1.8         26.3        (18.9)          -  $   812.4 
                                                                            
Income tax                                                                  
 provision                                                 110.6  $   150.3 
Tax rate                                                               18.5%
                                                                            
Net income             1.8         26.3        (18.9)     (110.6) $   662.1 
                                                                            
Net income per                                                              
 weighted-                                                                  
 average share,                                                             
 basic for Class                                                            
 A and Class B                                                              
 (3)            $        -  $      0.06  $     (0.04) $    (0.26) $    1.55 
                                                                            
Net income per                                                              
 weighted-                                                                  
 average share,                                                             
 diluted for                                                                
 Class A and                                                                
 Class B (4)    $        -  $      0.06  $     (0.04) $    (0.26) $    1.53 
                                                                            
                                                                            
(1) For the first six months of 2013, no costs were capitalized for the     
    development of software products. Amortization expense from previously  
    capitalized amounts was $26.3.                                          
                                                                            
(2) Non-GAAP financial information for the quarter is adjusted for a tax    
    rate equal to our annual estimated tax rate on non-GAAP income. This    
    rate is based on our estimated annual GAAP income tax rate forecast,    
    adjusted to account for items excluded from GAAP income in calculating  
    the non-GAAP financial measures presented above. Our estimated tax rate 
    on non-GAAP income is determined annually and may be adjusted during the
    year to take into account events or trends that we believe materially   
    impact the estimated annual rate including, but not limited to,         
    significant changes resulting from tax legislation, material changes in 
    the geographic mix of revenues and expenses and other significant       
    events. Due to the differences in the tax treatment of items excluded   
    from non-GAAP earnings, as well as the methodology applied to our       
    estimated annual tax rates as described above, our estimated tax rate on
    non-GAAP income may differ from our GAAP tax rate and from our actual   
    tax liabilities.                                                        
                                                                            
(3) Calculated based upon 428.2 basic weighted-average shares for Class A   
    and Class B.                                                            
                                                                            
(4) Calculated based upon 432.4 diluted weighted-average shares for Class A 
    and Class B.                                                            
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                   RECONCILIATION OF GAAP TO NON-GAAP DATA                  
                   For the Six Months Ended June 30, 2012                   
                   (in millions, except per share amounts)                  
                                 (unaudited)                                
                                                                            
                                                  Employer                  
                                                   Payroll                  
                                                    Taxes                   
                                                 on Employee                
                                   Stock-Based      Stock      Intangible   
                           GAAP   Compensation  Transactions  Amortization  
                          ------  ------------  ------------  ------------  
                                                                            
Operating expenses:                                                         
Cost of license revenues  $113.3          (1.0)            -         (27.0) 
Cost of serv
ices revenues $236.8         (12.9)         (0.8)         (2.2) 
Research and development  $471.0         (87.4)         (4.1)         (1.5) 
Sales and marketing       $754.9         (59.1)         (3.4)         (5.9) 
General and                                                                 
 administrative           $173.1         (22.3)         (0.9)            -  
                                                                            
Operating income          $429.1         182.7           9.2          36.6  
Operating margin            19.7%          8.4%          0.3%          1.7% 
                                                                            
Income before income                                                        
 taxes                    $438.0         182.7           9.2          36.6  
                                                                            
Income tax provision      $ 54.8                                            
Tax rate                    12.5%                                           
                                                                            
Net income                $383.2         182.7           9.2          36.6  
                                                                            
Net income per weighted-                                                    
 average share, basic for                                                   
 Class A and Class B (3)  $ 0.90  $       0.43  $       0.02  $       0.09  
                                                                            
Net income per weighted-                                                    
 average share, diluted                                                     
 for Class A and Class B                                                    
 (4)                      $ 0.88  $       0.42  $       0.02  $       0.08  
 
                                
                                    table continued below
 
                                                                         
                         Acquisition  Capitalized                        
                           Related      Software      Tax      Non-GAAP, 
                          Items and   Development  Adjustment      as    
                            Other      Costs (1)       (2)      adjusted 
                         -----------  -----------  ----------  --------- 
                                                                         
Operating expenses:                                                      
Cost of license revenues           -        (42.6)          -  $    42.7 
Cost of services revenues          -            -           -  $   220.9 
Research and development           -            -           -  $   378.0 
Sales and marketing                -            -           -  $   686.5 
General and                                                              
 administrative                 (1.7)           -           -  $   148.2 
                                                                         
Operating income                 1.7         42.6           -  $   701.9 
Operating margin                 0.1%         2.0%          -       32.2%
                                                                         
Income before income                                                     
 taxes                           1.7         42.6           -  $   710.8 
                                                                         
Income tax provision                                     73.1  $   127.9 
Tax rate                                                            18.0%
                                                                         
Net income                       1.7         42.6       (73.1) $   582.9 
                                                                         
Net income per weighted-                                                 
 average share, basic for                                                
 Class A and Class B (3) $         -  $      0.10  $    (0.17) $    1.37 
                                                                         
Net income per weighted-                                                 
 average share, diluted                                                  
 for Class A and Class B                                                 
 (4)                     $         -  $      0.11  $    (0.17) $    1.34 
                                                                            
(1) For the first six months of 2012, no costs were capitalized for the     
    development of software products. Amortization expense from previously  
    capitalized amounts was $42.6.                                          
                                                                            
(2) Non-GAAP financial information for the quarter is adjusted for a tax    
    rate equal to our annual estimated tax rate on non-GAAP income. This    
    rate is based on our estimated annual GAAP income tax rate forecast,    
    adjusted to account for items excluded from GAAP income in calculating  
    the non-GAAP financial measures presented above. Our estimated tax rate 
    on non-GAAP income is determined annually and may be adjusted during the
    year to take into account events or trends that we believe materially   
    impact the estimated annual rate including, but not limited to,         
    significant changes resulting from tax legislation, material changes in 
    the geographic mix of revenues and expenses and other significant       
    events. Due to the differences in the tax treatment of items excluded   
    from non-GAAP earnings, as well as the methodology applied to our       
    estimated annual tax rates as described above, our estimated tax rate on
    non-GAAP income may differ from our GAAP tax rate and from our actual   
    tax liabilities.                                                        
                                                                            
(3) Calculated based upon 426.1 basic weighted-average shares for Class A   
    and Class B.                                                            
                                                                            
(4) Calculated based upon 434.0 diluted weighted-average shares for Class A 
    and Class B.                                                            
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                              REVENUES BY TYPE                              
                               (in millions)                                
                                (unaudited)                                 
                                                                            
                                 For the Three Months   For the Six Months  
                                         Ended                 Ended        
                                       June 30,              June 30,       
                                 --------------------  -------------------- 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
                                                                            
Revenues:                                                                   
  License                        $   530.5  $   517.2  $ 1,018.7  $   999.1 
  Services:                                                                 
    Software maintenance             614.3      519.1    1,219.8    1,011.4 
    Professional services             98.3       86.7      196.1      167.7 
                                 ---------  ---------  ---------  --------- 
  Total services                     712.6      605.8    1,415.9    1,179.1 
                                 ---------  ---------  ---------  --------- 
Total revenues                   $ 1,243.1  $ 1,123.0  $ 2,434.6  $ 2,178.2 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
Percentage of revenues:                                                     
  License                             42.7%      46.1%      41.8%      45.9%
  Services:                                                                 
    Software maintenance              49.4%      46.2%      50.1%      46.4%
    Professional services              7.9%       7.7%       8.1%       7.7%
                                 ---------  ---------  ---------  --------- 
  Total services                      57.3%      53.9%      58.2%      54.1%
                                 ---------  ---------  ---------  --------- 
Total revenues                       100.0%     100.0%     100.0%     100.0%
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
                                                                            

 
                                VMware, Inc.                                
                                                                            
                           REVENUES BY GEOGRAPHY                            
                               (in millions)                                
                                (unaudited)                                 
                                                                            
                                                                            
                                 For the Three Months   For the Six Months  
                                         Ended                 Ended        
                                       June 30,              June 30,       
                                 --------------------  -------------------- 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
                                                                            
Revenues:                                                                   
  United States                  $   590.3  $   550.7  $ 1,158.8  $ 1,035.6 
  International                      652.8      572.3    1,275.8    1,142.6 
                                 ---------  ---------  ---------  --------- 
Total revenues                   $ 1,243.1  $ 1,123.0  $ 2,434.6  $ 2,178.2 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
Percentage of revenues:                                                     
  United States                       47.5%      49.0%      47.6%      47.5%
  International                       52.5%      51.0%      52.4%      52.5%
                                 ---------  ---------  ---------  --------- 
Total revenues                       100.0%     100.0%     100.0%     100.0%
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
        RECONCILIATION OF GAAP CASH FLOWS FROM OPERATING ACTIVITIES         
                             TO FREE CASH FLOWS                             
                       (A NON-GAAP FINANCIAL MEASURE)                       
                               (in millions)                                
                                (unaudited)                                 
                                                                            
                                                 For the Three Months Ended 
                                                          June 30,          
                                                 -------------------------- 
                                                     2013          2012     
                                                 ------------  ------------ 
                                                                            
GAAP cash flows from operating activities        $      534.1  $      391.3 
Capital expenditures                                    (76.1)        (44.3)
                                                 ------------  ------------ 
Free cash flows                                  $      458.0  $      347.0 
                                                 ============  ============ 

 
About Non-GAAP Financial Measures 
 To provide investors and others
with additional information regarding VMware's results, we have
disclosed in this press release the following non-GAAP financial
measures: non-GAAP operating income, non-GAAP operating margin,
non-GAAP net income, non-GAAP income per diluted share and free cash
flows. VMware has provided a reconciliation of each non-GAAP
financial measure used in this earnings release to the most directly
comparable GAAP financial measure. These non-GAAP financial measures,
other than free cash flows, differ from GAAP in that they exclude
stock-based compensation, employer payroll tax on employee stock
transactions, amortization of acquired intangible assets, realignment
charges, acquisition and other-related items, the net effect of the
amortization and capitalization of software development costs, and
gain on disposition of certain lines of business and other net, each
as discussed below. Free cash flows differ from GAAP cash flows from
operating activities in its treatment of capital expenditures.  
We have also presented in this press release additional six quarters
of historical data for revenue and unearned revenue, excluding
revenue generated each period by the products and services
contributed to GoPivotal, Inc. on April 1, 2013 and the products and
services associated with the divestures consummated by us in 2013, We
believe these measures are useful to investors because they allow
investors to make meaningful comparisons of our revenues and unearned
revenues across periods. 
VMware's management uses these non-GAAP financial measures to
understand and compare operating results across accounting periods,
for internal budgeting and forecasting purposes, for short- and
long-term operating plans, to calculate bonus payments and to
evaluate VMware's financial performance, the performance of its
individual functional groups and the ability of operations to
generate cash. Management believes these non-GAAP financial measures
reflect VMware's ongoing business in a manner that allows for
meaningful period-to-period comparisons and analysis of trends in
VMware's business, as they exclude expenses and gains that are not
reflective of ongoing operating results. Management also believes
that these non-GAAP financial measures provide useful information to
investors and others in understanding and evaluating VMware's
operating results and future prospects in the same manner as
management and in comparing financial results across accounting
periods and to those of peer companies. Additionally, management
believes information regarding free cash flows provides investors and
others with an important perspective on the cash available to make
strategic acquisitions and investments, to repurchase shares, to fund
ongoing operations and to fund other capital expenditures.  
Management believes these non-GAAP financial measures are useful to
investors and others in assessing VMware's operating performance due
to the following factors:  


 
--  Stock-based compensation. Stock-based compensation is generally fixed
    at the time the stock-based instrument is granted and amortized over a
    period of several years. Although stock-based compensation is an
    important aspect of the compensation of our employees and executives,
    the expense for the fair value of the stock-based instruments we
    utilize may bear little resemblance to the actual value realized upon
    the vesting or future exercise of the related stock-based awards.
    Furthermore, unlike cash compensation, the value of stock options is
    determined using a complex formula that incorporates factors, such as
    market volatility, that are beyond our control. Additionally, in order
    to establish the fair value of performance-based stock awards, which
    are also an element of our ongoing stock-based compensation, we are
    required to apply judgment to estimate the probability of the extent
    to which performance objectives will be achieved. Management believes
    it is useful to exclude stock-based compensation in order to better
    understand the long-term performance of our core business and to
    facilitate comparison of our results to those of peer companies.
    
    
--  Employer payroll tax on employee stock transactions. The amount of
    employer payroll taxes on stock-based compensation is dependent on
    VMware's stock price and other factors that are beyond our control and
    do not correlate to the operation of the business.
    
    
--  Amortization of acquired intangible assets. A portion of the purchase
    price of VMware's acquisitions is generally allocated to intangible
    assets, such as intellectual property, and is subject to amortization.
    However, VMware does not acquire businesses on a predictable cycle.
    Additionally, the amount of an acquisition's purchase price allocated
    to intangible assets and the term of its related amortization can vary
    significantly and are unique to each acquisition. Therefore, VMware
    believes that the presentation of non-GAAP financial measures that
    adjust for the amortization of intangible assets provides investors
    and others with a consistent basis for comparison across accounting
    periods.
    
    
--  Realignment charges: Realignment charges include workforce reductions,
    asset impairments and losses on asset disposals. We believe it is
    useful to exclude these items, when significant, as they are not
    reflective of our ongoing business and operating results.
    
    
--  Acquisition and other-related items. Acquisition and other related
    items include direct costs of acquisitions and dispositions, such as
    transaction and advisory fees, which vary significantly and are unique
    to each transaction. Additionally, VMware does not acquire or dispose
    of businesses on a predictable cycle.
    
    
--  Capitalized software development costs. Capitalized software
    development costs encompass capitalization of development costs and
    the subsequent amortization of the capitalized costs over the useful
    life of the product. Amortization and capitalization of software
    development costs can vary significantly depending upon the timing of
    products reaching technological feasibility and being made generally
    available. We did not capitalize software development costs related to
    product offerings in either the first half of 2013 or fiscal year 2012
    given our current go-to-market strategy. In f
uture periods, we expect
    our amortization expense to steadily decline as previously capitalized
    software development costs become fully amortized.
    
    
--  Gain on disposition of certain lines of business and other, net. In
    the first half of 2013, we recognized a gain as a result of exiting
    certain lines of business under our business realignment plan, which
    was partially offset by a charge recognized for a non-recoverable
    strategic investment. These transactions resulted in a net gain of
    $18.9 million. To the extent that significant gains or losses are
    realized on such dispositions and strategic investments, they do not
    occur on a predictable cycle, and such gains and losses are not
    reflective of our ongoing business and operating results.
    
    
--  Tax adjustment. Non-GAAP financial information for the quarter is
    adjusted for a tax rate equal to our annual estimated tax rate on
    non-GAAP income. This rate is based on our estimated annual GAAP
    income tax rate forecast, adjusted to account for items excluded from
    GAAP income in calculating our non-GAAP income. Our estimated tax rate
    on non-GAAP income is determined annually and may be adjusted during
    the year to take into account events or trends that we believe
    materially impact the estimated annual rate including, but not limited
    to, significant changes resulting from tax legislation, material
    changes in the geographic mix of revenues and expenses and other
    significant events. Due to the differences in the tax treatment of
    items excluded from non-GAAP earnings, as well as the methodology
    applied to our estimated annual tax rates as described above, our
    estimated tax rate on non-GAAP income may differ from our GAAP tax
    rate and from our actual tax liabilities.

  
Additionally, we believe that the non-GAAP financial measure free cash
flows is meaningful to investors because we review cash flows
generated from operations after taking into consideration capital
expenditures due to the fact that these expenditures are considered
to be a necessary component of ongoing operations.  
The use of non-GAAP financial measures has certain limitations
because they do not reflect all items of income and expense that
affect VMware's operations. Specifically, in the case of stock-based
compensation, if VMware did not pay out a portion of its compensation
in the form of stock-based compensation and related employer payroll
taxes, the cash salary expense included in operating expenses would
be higher, which would affect VMware's cash position. VMware
compensates for these limitations by reconciling the non-GAAP
financial measures to the most comparable GAAP financial measures.
These non-GAAP financial measures should be considered in addition
to, not as a substitute for or in isolation from, measures prepared
in accordance with GAAP and should not be considered measures of
VMware's liquidity. Further, these non-GAAP measures may differ from
the non-GAAP information used by other companies, including peer
companies, and therefore comparability may be limited. Management
encourages investors and others to review VMware's financial
information in its entirety and not rely on a single financial
measure.  
Contacts:  
Paul Ziots 
VMware Investor Relations 
pziots@vmware.com 
650-427-3267  
Nick Fuentes 
VMware Global Communications 
nfuentes@vmware.com 
650-427-1104 
 
 
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